FixeD Rate Loan. Lending solutions to support business

Transcription

1 Lending solutions to support business a Fixed Rate Loan is a way to manage the cost of borrowing. Business must have a minimum turnover of 250,000 to apply. How could this benefit me? With a fixed rate loan, you will get the benefits of Loan facilities from 25,000. Protection against rising interest rates. if interest rates rise your interest payments remain unchanged. Knowing your cost of borrowing, you know exactly what your interest rate and your fixed payment amount will be for the duration of the fixed rate period, allowing you to budget more effectively and plan for your business. Flexibility, you have a choice of terms and features to suit your specific business needs. What are the Key Risks of Fixed Rate Loans? early Repayment amount. You may have to pay a substantial Fixed Rate Breakage amount if your fixed rate loan is cancelled, repaid in part or full before it matures. You give up the ability to benefit from favourable moves in variable interest rates. if wholesale money market interest rates fall your interest payments will not reduce as your rate is fixed. With a fixed rate loan you are fixing your repayment profile and there could be significant costs involved if you requested to change to another type of repayment profile. How is my fixed rate constructed and how will I know what it will be? the fixed rate you will pay is the sum of Santander UK s fixed funding rate and Santander UK s lending margin. When you have decided that you would like to fix all or part of your loan we will provide you with an indicative rate. as interest rates vary with the wholesale money markets, this rate will be for indicative purposes only. only on the date that you wish to drawdown the loan will we be able to provide you with a final rate. We will do this by telephone and/or by and you can then choose whether or not to accept it. if you choose to proceed with the loan this rate will be binding, and we will confirm the agreement in a fixed rate side letter within 10 working days. You will need to sign and return the letter to your Relationship Director. Please note: if, having agreed to the final rate, you decide not to drawdown the loan you may have to pay a Fixed Rate Breakage amount. What happens when the fixed rate ends? We will notify you when your fixed rate period is about to end. if the term of your loan extends beyond the fixed rate period, it will automatically revert to Santander UK s lending margin plus the variable rate at the time the fixed rate period ends. if you would like the loan to continue on a fixed rate basis please talk to your Relationship Director at that time and they will be happy to discuss the rates that are available. Further details regarding the conditions for fixed rate loans can be found in our General terms and Conditions, which your Relationship Director will provide you with. For more information about the costs associated with repaying or amending a fixed rate loan before it matures please refer to the section in the fact sheet called How can i calculate what the Fixed Rate Breakage amount would be?

2 What early repayment costs might there be? if a fixed rate loan is cancelled or repaid, wholly or in part before maturity, the payment you will need to make to Santander UK comprises of three elements: 1 the principal amount to be repaid 2 all accrued interest on the amount repaid early 3 the Fixed Rate Breakage amount these costs would also apply if you fail to comply with the obligations of your fixed rate loan agreement and we demand early repayment or if you make any repayment of the loan earlier than originally scheduled. Why might there be a Fixed Rate Breakage Amount? the Fixed Rate Breakage amount is designed to cover our costs associated with the early repayment. When you take out a fixed rate loan, the interest rate used to calculate the interest you pay is fixed for the duration of the fixed rate period regardless of interest rate market fluctuations. if you decide at any time to cancel or repay in the circumstances described above, Santander UK may need to cancel or unwind funding commitments put in place when the loan was set up. in some circumstances Santander UK may need to enter into new commitments. Depending on whether term money market rates have fallen or risen in the period between loan drawdown and early repayment the outcome of these actions may be a cost or a benefit to Santander UK. Where Santander UK has incurred additional costs it will require you to pay them, but where it has obtained a benefit it will refund this to you. What are the circumstances where I may have to pay a Fixed Rate Breakage Amount? Circumstances where you could be liable to pay a Fixed Rate Breakage amount would include: if you choose to repay all or part of your fixed rate loan early. non utilisation of your fixed rate loan. if you fail to comply with the obligations of your fixed rate loan agreement (e.g. breach of loan covenants or in the event of default) and we demand early repayment. How can I calculate what the Fixed Rate Breakage Amount would be? the Fixed Rate Breakage amount is calculated at the fixed rate loan breakage point i.e. at the time the cancellation or repayment takes place. the calculation uses the prevailing market rates at the time of the breakage point, Santander UK s fixed funding rate at the time the loan was drawn down, the fixed rate loan period remaining and the loan amount cancelled or repaid early. the difference in the value of Santander UK s funding rate at the time the loan was drawn down and the prevailing money market rate at the breakage point is determined. this is then multiplied by the fixed-rate period remaining and the amount being repaid. if the prevailing money market rate at the breakage point is lower than the Santander UK fixed funding rate for the remaining period, you will pay us the net present value of the difference. if the prevailing money market rate at the breakage point is higher than the Santander fixed funding rate for the remaining period we will pay the net present value of the difference to you. Please note that the fixed rate breakage amount could be substantial.

3 this example is based on an interest only loan due to be repaid either on or after the end of the fixed rate period. if the loan is amortising (i.e. repayments reduce the principal amount) the calculation may be different. if you require more information please refer to the sections regarding fixed rate breakages or speak to your Relationship Director. Fixed Rate Breakage Amount Example: a fixed rate loan for 1 million at 5% (2% being Santander s fixed funding rate, and 3% Santander lending margin) over five years. You decide to repay after three years i.e. with two years of the loan term remaining. if the prevailing money market rate for two years at the fixed rate loan breakage point was 1% a Fixed Rate Breakage amount of around 20,000 1 would be payable by you. For example: 1 million x (2% 1%) x 2 years = You would pay us 20,000 (subject to net present value adjustment) if the prevailing market rate for two years at breakage point was 2.5%, then there would be a Fixed Rate Breakage amount due to you of around 10, million x (2%-2.5%) x 2 years = We would pay you 10,000 (subject to net present value adjustment). at the fixed rate loan breakage point, in addition to any potential Fixed Rate Breakage amount and the principal amount repaid, you would need to pay any accrued interest due on the principal amount. 1 Loan Amount Repaid Early x Difference in interest rates (Santander Fixed funding rate Prevailing Money Market Rate) x fixed-rate period of loan remaining (this amount is subject to Net Present Value Adjustment).

4 Impact of a Fixed Rate Breakage Amount Continuing the previous example, below is a table summarising the impact of the difference between Santander UK s fixed funding rate at the time of the drawdown and prevailing money market rates at the breakage point. it illustrates the breakage amounts for different fixed rate loan years remaining on a notional loan amount of 1million. Please note that these are examples only, and the difference between the prevailing money market rate and Santander UK s fixed funding rate and potential Fixed Rate Breakage amounts could exceed the levels illustrated. Fixed Rate Loan Breakage Amount Illustration Difference in interest rates* Years remaining on your fixed rate loan % 30,000 60,000 90, , ,000 2% 20,000 40,000 60,000 80, ,000 1% 10,000 20,000 30,000 40,000 50,000 }Fixed Rate Breakage Amount payable by you 0% % 10,000 20,000 30,000 40,000 50,000-2% 20,000 40,000 60,000 80, ,000-3% 30,000 60,000 90, , ,000 Fixed Rate Breakage Amount }payable to you note: the above table is for illustrative purposes and rates can move outside these levels. these values are subject to net present value adjustments. *Difference between Santander UK s fixed funding rate (at the time the interest rate was fixed) and the prevailing money market rate.

5 What are the arrangement and legal fees for this loan? there are fees associated with covering the costs of putting it in place. these include the arrangement and legal fees, which vary depending on the loan circumstances. Your Relationship Director will agree all of these with you under the terms of your loan. What documents do I need to sign if I wish to proceed? once you have read and understood this fact sheet and our What we look for when we lend brochure ( ) and you have decided that you would like to apply for a fixed rate loan we will provide you with an indicative rate. as market rates can change daily, the indicative rate is an example of the fixed rate you will be charged based on information available at the time. this is an important document as it contains additional information about the loan and you should fully discuss it with your Relationship Director. What should I do if I am unsure or need further advice? Santander UK does not provide advice in the sale of fixed rate loans. these materials do not provide a substitute for independent legal, tax, accounting or other professional advice in making any financial decision. Should you require further advice you should seek out the relevant type of independent advice before taking any decision. Please note: the information in this document is provided for information purposes only. these materials are the property of Santander UK plc and its affiliates (the Bank) and may not be provided to third parties. nothing in these materials constitutes investment, legal tax or accounting advice and the Bank makes no representation that the information provided herein is accurate or complete. You will be asked to sign the form to confirm that the fact sheet, the indicative rate and how the fixed rate loan works has been discussed and explained to you and that you are happy to proceed with your application. Further documents will be sent to you once we are in a position to make a formal offer, which will need to be signed and returned before the final rates can be confirmed and the loan can be drawndown. the facility letter, the Fixed Rate letter and the General terms and Conditions are the terms and conditions by which you shall be bound in relation to the loan. as with any legal agreement, you should review any documents we provide to you to make sure you understand them before you sign them. ALL LENDING IS SUBJECT TO STATUS AND LENDING CRITERIA. Santander Corporate & Commercial is a brand name of Santander UK plc, abbey national treasury Services plc (which also uses the brand name Santander Global Banking and Markets) and Santander asset Finance plc, all (with the exception of Santander asset Finance plc) authorised by the Prudential Regulation authority and regulated by the Financial Conduct authority and the Prudential Regulation authority. our Financial Services Register numbers are: and respectively. in Jersey, Santander UK plc is regulated by the Jersey Financial Services Commission to carry on deposit-taking business under the Banking Business (Jersey) Law Registered office: 2 triton Square, Regent s Place, London nw1 3an. Company numbers: , and respectively. Registered in england. Santander and the flame logo are registered trademarks. Santander UK plc is a participant in the Jersey Banking Depositor Compensation Scheme. the Scheme offers protection for eligible deposits of up to 50,000. the maximum total amount of compensation is capped at 100,000,000 in any 5 year period. Full details of the Scheme and banking groups covered are available on the States of Jersey website ( or on request Jan 14 Ht